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A 4R Framework for Climate Finance: A Pathway for Effective Climate Finance Allocation

By Boubacar A. Cissé, Bouthayna El Amine, Samuel W. Anuga, Mohamed L. Metougui, Bruno Gerard, Michael G. Jacobson, and Ngonidzashe Chirinda

Climate change has fundamentally transformed the global economic landscape. It is a paradigm shift, and its effects transcend all sectors, with agriculture being one of the most severely affected due to its sensitivity to climate fluctuations. In response, new policies have been formulated to guide actions, while new technologies are continuously being developed to facilitate innovative methods of performing tasks; also, new financial mechanisms have been introduced to facilitate the sourcing and allocation of funds. Financial mechanisms are the backbone of the climate mitigation and adaptation system. Although efforts are being put in place, the desire for climate financing is echoed as never before. While the efforts are significant, they often fall short in appropriately supporting people in developing economies, which are the most vulnerable to climate change. Questions remain as to whether financial mechanisms are effectively and efficiently meeting their intended goals.

Climate finance encompasses the financial resources mobilized from local, national or transnational financing—drawn from public, private and alternative sources—that seek to support mitigation and adaptation actions that will address climate change (UNFCCC, n.d.; Nakhooda et al., 2015). In other words, climate finance explores the funding of public and private investments aimed at taking actions against climate change (Zeroed, 2019). While the above could be globally accepted attempts to define climate finance due to their generality, other definitions tend to provide more economic and financial perspective. Reboredo (2019) discusses climate finance in terms of the attitudes of investors regarding climate change risks, their impact on investment decisions, and the pricing and hedging of climate change risks in financial markets. Moreover, according to Kouwenberg and Zheng (2023), climate finance is important for several reasons; first, climate change mitigation actions are aimed at supporting the adoption of renewable energies and new technologies, as well as making economies less energy intensive. Another reason is that looking at the high negative economic and social impacts of climate change, it would be imperative for investors to determine and manage the risks associated with their investments.

As a result, it is safe to assert that many climate finance models sometimes focus on the “marketable” traits of climate change. A 4R Framework for Climate Finance introduced by the African Carbon Flagship Program (ACFP), led by the University Mohammed VI Polytechnic (UM6P), aims to address significant discrepancies in climate finance allocation across Africa and attempts to demystify climate finance. The Framework highlights the importance of delivering climate finance to the right people, at the right time, in the right amount, and at the right cost to achieve effective climate adaptation and mitigation. This approach intends to breakdown climate finance and make it more clear to key stakeholders at different levels.

Figure 1 below illustrates the flow of global climate finance across its lifecycle in 2021 and 2022. According to the data, only 4.6% of total climate finance has been allocated to North and Sub-Saharan Africa. In contrast, most climate funds are concentrated in North America, Western Europe, and East and Pacific Asia. Notably, most funds in the U.S. and Canada are sourced from private investments, whereas European climate funding predominantly comes from public sources. These figures, averaged over the two years and calculated in billions of USD, help smooth out any short-term fluctuations.

Figure 1. Landscape of Climate Finance in 2021/2022 [From Climate Finance Initiative (Global Landscape of Climate Finance 2024:
Insights for COP 29)].

Climate finance was a topic of discussion among policymakers long before 2015 Paris Agreement; in 1994, the United Nations Framework Convention on Climate Change (UNFCCC) established the Global Environmental Facility (GEF) to fund climate change projects (Kouwenberg and Zheng, 2023). According to the 2024 Global Landscape of Climate Finance report by the Climate Policy Initiative (CPI), emerging and least-developed economies continue to lack sufficient funding to address climate change impacts. Although, there have been positive developments in climate finance, the report indicates that current flows are significantly below the estimated annual requirement of USD 6.7 to 10 trillion necessary through 2050 to mitigate severe climate effects. The literature on climate finance, as reviewed by Kouwenberg and Zheng, predominantly focuses on renewable energy financing, climate risk assessment, investor attitudes, and the pricing of climate risks within financial markets. However, such models often overlook small scale farmers and local communities, who are highly vulnerable to climate impacts. This is where ACFP’s framework is proposed to play a vital role. The 4R Framework for Climate Finance The Framework emphasizes that for climate finance to drive effective climate action, it must meet four critical criteria. First, funds should reach the right people—those directly impacted by climate risks and most in need of resources, such as vulnerable communities and climate-affected regions. Second, funds must be available at the right time—ensuring timely support that aligns with urgent climate needs, whether for immediate disaster response or proactive adaptation measures. Third, the right amount of finance is crucial to cover the full scope of climate initiatives, from large-scale infrastructure projects to local, community-driven adaptation efforts. Finally, climate finance must be provided at the right cost, which means minimizing financial burdens, particularly on low-income and developing nations, through low-interest or grant-based funding options. By meeting these criteria, climate finance can more effectively support substantial and equitable climate action, maximizing impact where it’s most needed. This approach ensures that climate finance supports not only the mitigation of emissions but also adaptation, resilience, and sustainable development in vulnerable regions.

Currently, more than two dozen climate finance mechanisms are under usage globally, with additional new mechanisms under examination, such as the Damage and Loss Fund and the Tropical Forest Forever Facility (TFFF). Although these initiatives seem promising, they often lack effectiveness due to challenges in fund allotment. This 4R Framework for Climate Finance proposes to source funds and successfully channel them to where they are needed the most. Various internal and external barriers hinder access to climate finance in developing nations, including insufficient institutional capacity and weak compliance to international climate finance requirements (UNDP, 2021; UNFCCC, 2022). Moreover, policy, planning and budgeting inefficiencies, such as misaligned national development and climate plans, further complicate funding access (UNDP, 2024). This access is key to ensuring the impact of climate actions as the right people will be able to find the right amount on time; all these, at minimum transaction costs.

Key Components of the 4R Framework for Climate Finance
The Framework (Fig. 2) aims to enhance the effectiveness and impact of both existing and future financial mechanisms. The framework outlines the process of designing and developing what is perceived as the missing piece of proposed models. Thus fundamental elements could be proposed to make the current climate finance models effective and efficient.

Figure 2. The African Carbon Flagship Program (ACFP) 4R Framework for Climate Finance.

Right People
A significant critique of current climate finance mechanisms is that climate initiative funds rarely reach climate-vulnerable groups (Carbon Brief, n.d.; OECD, n.d.; IIED, 2021). Inefficiencies in fund disbursement from supranational entities to local institutions often result in funds bypassing those who need them most. This is not explained only by the high rate of corruption in many target nations, but it is also due to the cumbersome bureaucracy in the fund distribution network. Climate finance needed for adaptation actions is higher in developing nations, especially in Africa, than mitigation actions. However between 2016 and 2020, 67% of global climate finance was dedicated to climate change mitigation efforts in developing countries (Songwe et al., 2022). Consequently more tailored action-based funds must be put forth to address challenges faced by the most vulnerable communities.

To address these disparities, the Framework advocates for funds to be specifically directed toward communities most affected by climate change, such as smallholder farmers and rural populations; these groups are at the frontline of the battle against climate change. This will require a robust policy framework that prioritizes local communities, farmers, indigenous people etc., and an implementation structure that ensures equitable fund distribution. Governments must play a central role in creating policies that recognize the unique needs of these communities, accompanied by well-structured implementation entities to oversee fund allocation. It’s essential to establish transparent tracking and reporting systems that allow stakeholders to monitor fund allocation and outcomes. Engaging local communities in decision-making processes increases relevance and accountability, while setting criteria for funding vulnerable regions.

Right Time
Timely access to funds is essential to avoid rising costs associated with delayed climate actions. Songwe et al. (2022) highlight that delays in climate action not only increase financial costs but also exacerbate climate-related risks. Timeliness in climate financing enables local communities and vulnerable groups to effectively act, hence reduce and/or adapt to climate effects in their localities. This also benefits investors and other stakeholders as the “time value of money” is fundamental and crucial for investment; a basic finance principle states that today’s money/investment is more valuable than tomorrow’s (i.e., it is always advisable to invest today than waiting).

Timeliness can be realized through sensitizing stakeholders on the emergency of taking climate actions. Timeliness can also be achieved through the development of digital platforms that facilitate rapid access to finances, thereby reducing administrative delays and ensuring that funds are available when needed. Moreover, timeliness involves quick decision making with regards to climate financing. During international conferences like the Conference of Parties (COP), several developing countries have regularly voiced their concern on the slow speed of fund deployment. It is time these voices be heard so that international bodies can speed up the process of obtaining and allocating capital.

For secured climate finance to reach people at the right time there is need for efficient allocation processes, streamlined application systems, and close coordination between international and local stakeholders. Climate finance institutions can adopt rapid-response funding models that prioritize emergency assistance to regions facing immediate climate threats, such as natural disasters. Streamlined, user-friendly application processes also enable faster disbursement, helping communities and governments secure funds without prolonged delays or bureaucratic hurdles. Furthermore, climate finance organizations should work closely with local governments and NGOs, which have direct knowledge of urgent needs on the ground, to align funding timelines with local climate risk calendars.

Right Amount
Determining the appropriate amount of funding required for effective climate action is challenging. Current commitments for funding are widely regarded as insufficient. At the 29th Conference of the Parties (COP29) held in Baku, Azerbaijan, developed countries reaffirmed their commitment to significantly increase climate finance pledges to support developing nations. The newly established agreement seeks to triple the previous annual target of USD 100 billion to USD 300 billion by 2035. Additionally, efforts will be directed towards mobilizing a total of USD 1.3 trillion annually by 2035 from both public and private sources to address climate action requirements (UNFCCC, 2024). This commitment surpasses the initial USD 100 billion annual target, which was successfully achieved in 2022, two years prior to the scheduled completion date (OECD, 2024).

The increase of the financial commitments indicate the recognition of the high-rising climate change cost and the necessity for substantial investment to support vulnerable nations in their efforts of climate actions.

The Framework attempts to bring forward all climate finance needs for the agriculture sector in Africa so that these will align with the actual requirements. Sometimes, under-financing can lead to higher cost as when the provided capital is insufficient to tackle problems and take proper actions, there will be need to start all over again. Consequently, a thorough analysis will be a prerequisite to determine the amount needed to finance actions.

Ensuring that climate finance recipients receive appropriate levels of funding requires accurate assessments of local needs, clear funding guidelines, and regular monitoring. Comprehensive climate risk assessments and cost analyses, conducted with local stakeholders, help determine the specific financial requirements for effective adaptation or mitigation projects. Climate finance organizations can then set funding benchmarks and tailor allocations based on these assessments, prioritizing high need areas. Second, establishing flexible funding mechanisms that allow for adjustments helps address any funding gaps or emerging needs over time. Regular audits and evaluations can further verify that allocated amounts align with project goals and community needs, ensuring funds are not under or overspent. Finally, advances in digital tools and real-time monitoring platforms enable funders to track financial flows closely, ensuring the right amount reaches projects without unnecessary delays or surpluses.

Right Cost
Despite all the hypes of climate finance, the cost of capital for climate actions in developing countries remains a significant barrier. High transaction fees and intermediary costs may limit the effectiveness of financing; reducing the cost of capital in these regions is critical for achieving meaningful climate actions (Sachs, 2024). During COP29, cutting the cost of capital down was at the center of discussions; many contributors highlighted the need to address investment cost in developing countries. As part of the Climate Finance Delivery Plan (2022), developed nations have committed to collaborating with developing countries to strengthen the role of Multilateral Development Banks (MDBs) in providing climate finance. Additionally, promises were made at COP27 and COP28 to improve funding accessibility for Small Island Developing States (SIDS) and Least Developed Countries (LDCs) by reforming MDB and climate fund policies (Songwe, et al., 2022).

ACFP’s 4R Framework for Climate Finance proposes the development and implementation of new policies to address this problem. Policy interventions targeting cost reduction in climate finance are crucial in regions where general financing costs are already high. For example, simplifying access criteria and reducing administrative barriers for local institutions could help lower costs associated with fund acquisition, making climate finance more accessible and affordable in developing countries. The use of digital platforms could also help targeted vulnerable communities to have access to low-cost funds by avoiding unnecessarily high administrative charges.

Conclusion
ACFP’s proposed 4R Framework for Climate Finance addresses the urgent issues associated with current climate funds allocations in terms of target groups, time, adequate amount and cost in the climate finance models. The framework helps in effective climate actions by determining the right people to whom funds must be directed, the right timing, in the right amount, and at the right cost.

Dr. Boubacar (e-mail: boubacar.cisse-ext@um6p.ma) is Postdoctoral Researcher at Mohammed VI Polytechnic University (UM6P), Benguérir, Morocco. Dr. El Amine is Postdoctoral Researcher, UM6P. Dr. Anuga is Postdoctoral Researcher (Climate Policy), UM6P. Dr. Metougui is Scientist, Agroforestry and Rehabilitation, UM6P. Dr. Gérard is Dean, College of Agriculture and Environmental Sciences, UM6P. Dr. Jacobsen is Professor of Forest Resources, Department of Ecosystem Science and Management, Penn State, University Park, Pennsylvania, USA. Dr. Chirinda is Professor Sustainable Tropical Agriculture, UM6P.

Acknowledgement
The authors are grateful to OCP Foundation, for funding the Africa Carbon Flagship Program. However, OCP Foundation’s support for the production of this publication does not constitute an endorsement of its contents. The views expressed herein represent solely those of the authors. OCP Foundation cannot be held responsible for any use or interpretation which may be made of the information contained therein.

Cite this article
Cissé, B.A., El Amine, B., Anuga, S.W., Metougui, M.L., Gerard, B., Jacobson, M.G., and Chirinda, N. 2024. A 4R Framework for Climate Finance: A Pathway for Effective Climate Finance Allocation, Growing Africa 3(2):20-24. https://doi.org/10.55693/ga32.JMLR2841

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